Exit A Plus Realty v. Zuniga: Rule Variance Does Not Cost Broker Commission

A New Jersey court has considered whether the failure to follow the exact requirements in the state statutes regarding the execution of a listing agreement resulted in an automatic denial of a commission.

Edison and Teresita Zuniga (“Sellers”) listed their property for sale with Coldwell Banker Jablonski Real Estate (“Brokerage”) for sixty days by executing a standard listing agreement. The Brokerage’s representative (“Salesperson”) did not leave a copy of the listing agreement with the Sellers following execution; instead, the Salesperson mailed the completed agreement to the Sellers the next day. The Salesperson had added “90 days” in the protection period blank space following the execution of the listing agreement, meaning that the Brokerage would receive a commission if the property were sold within 90 days after the expiration of the listing agreement to a buyer that the Brokerage had introduced to the property during the listing period.

Upon receiving the executed listing agreement from the Brokerage, the Sellers noticed the “90 days” added to the protection period clause. One of the Sellers called the Salesperson about this, but the Salesperson allegedly told the Sellers not to worry about this provision. Nevertheless, one of the Sellers crossed off “90 days” and wrote “60 days” into the agreement, allegedly because they thought that this provision should cover the same period as the listing agreement.

During the listing period, Exit A Plus Realty (“Buyer’s Representative”) produced a buyer (“Buyer”) for the property. The Buyer made an offer for the property, but the appraisal valuation fell below her offer. The Sellers refused to lower their price to match the appraised value of the property, and so the Sellers declared the purchase contract “null and void” one day after the expiration of the listing agreement.

A few days later, the Sellers contacted the Buyer to inform her that they would now accept the appraised value of the property and the Buyer agreed to these terms. Upon learning of the impending sale, the Brokerage and Buyer’s Representative demanded payment of their commissions. The Sellers refused, and so the Brokerage filed a lawsuit against the Sellers for their commission. The trial court ruled in favor of the Sellers, finding that the Salesperson had not complied with a New Jersey statute requiring that all listing agreements must be left with the client following execution. The Brokerage appealed.

The Superior Court of New Jersey, Appellate Division, reversed the trial court. The court first considered the Brokerage’s argument that it had substantially complied with New Jersey law by mailing the listing agreement to the Sellers one day after execution. New Jersey law sets forth various actions for which the state’s real estate commission (“Commission”) can sanction a licensed real estate broker, including the failure to provide the “client with a fully executed copy of any sale or….listing contract at the time of execution thereof”.

The court disagreed with the trial court’s position that failure to comply with the statutory provisions made the listing agreement void, adopting a position advocated by the New Jersey Association of REALTORS® (“NJAR”) in an amicus brief. The statute at issue does not provide a remedy for a real estate professional’s failure to meet the terms of the statute or even set forth the discipline that the Commission can impose for failing to meet the terms of the statute; instead, the statute simply gives the Commission the power to impose discipline for such violations.

The court found that the Brokerage’s failure to follow the exact terms of the statute only made the contract voidable, not automatically void. If the legislature had desired to void all listing agreements which did not comply, it could have done so by including such language in the statute, as it has done in other state laws.

The court also noted that the Sellers suffered no harm from the Brokerage’s failure to deliver the contract a day after execution. The court also pointed to the fact that the Sellers had noticed the protection period clause upon receipt of the listing agreement, as they had called to discuss the clause with the Brokerage. The court rejected the Sellers argument that they had not understood the import of the protection period clause because the terms of the protection period were clear in the listing agreement. The court also noted that the Brokerage had introduced the Buyer to the property, and the Sellers’ actions in canceling the purchase agreement and entering into another agreement shortly thereafter introduced questions of their good faith and fair dealing with the Brokerage. Thus, the court reversed the lower court and remanded the case back to the trial court for further proceedings.

Exit A Plus Realty v. Zuniga, 395 N.J.Super. 655, (N.J. Super. Ct. A.D. 2007)

Editor’s Note: Special thanks to Barry Goodman, General Counsel to NJAR, for alerting NAR Legal Affairs to this decision.

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